New! Trader Q&A archives – Our general trading strategy

Aside from sharing our best swing trading stock and ETF picks and teaching our proven trading strategy, one of the things we pride ourselves on is the top-notch customer service we provide to our clients. All paid subscribers of The Wagner Daily readily have access to the professional team of traders at MTG via our Live Trading Room, Live Q&A webinars, and e-mail for those who are unable to attend our live events. On this blog, we have decided to start sharing our exact replies to the questions asked by some of our members because we’re happy to share the knowledge with fellow traders.  Here is the first trader question, received from Barry on April 10 (edited only for grammatical accuracy):

Question: Hi Rick,  I just signed up and would like to know how I can get the most out of this subscription.  Also, will you please explain your general trading strategy? Any advice would be most appreciated.   Best Regards, Barry

Answer: Good morning, Barry. Let me break down your question into digestible parts:

Holding period – We focus on short to intermediate-term swing trading.  When our setups are working out well, along with a strong market trend, we prefer to hold stocks for 2-4 weeks.  When the market isn’t as healthy, or is just starting to push higher and we do not trust the price action as much, then we hold for 1-2 weeks.  When there is distribution in the market and it clusters, we usually go to cash and wait for the dust to settle for a few days and then look for quality buy setups to emerge.

Patterns – There are two types of buy setups we most frequently look for: breakout and pullback.  Most of our buy patterns occur in stocks that are trading at or near 52-week highs.  All breakout entries are initiated once a stock has formed a valid basing pattern (usually at least 4-weeks in length).  All pullback buys are in stocks that have recently pulled back after breaking out are within 5-12% of a recent swing high. The third type of setup we occasionally enter is a trend reversal play. However, these are only entered after the broad market has been in a long-term downtrend and we are looking for emering leadership.

Money Management – We are extremely risk averse, so we always try to keep our losses to less than 1% of account value.  We look to take profits in stocks once we are up 2 to 3x what we risk.  We always set stops and obey them.  Stops are normally 3-7% away from our buy entry.  The price action dictates our stop width, as we like to place stops beneath the most recent swing low.

How to use the Wagner Daily newsletter – Trading stocks and ETFs together, instead of just one or the other, tends to balance out the portfolio during the year.  When the market is trending higher, stocks are usually the better way to go.  But when the market isn’t healthy, ETFs really shine, as we are able to trade different asset classes and take advantage of trends outside of stocks.   As far as position sizing goes, the easiest way to size trades is to simply split your account up in slots.  So if you have a 50k account, split the account up in 10 slots of 5k each (mirroring our 50k model account; adjust based on size of your own account).  Every time there is a trade, you can use up a slot until you are full.  If we have a new trade on and your account is full, you may want to pass on that trade or possibly get out of a trade that has underperformed to make room for a new entry. Let me know if you have further questions.

Regards,

Rick Pedicelli
MTG Portfolio Manager